Oil Market Snapshot – March 2017

  • Brent fell to $50/bbl in mid-March on market concerns about the OPEC/non-OPEC production agreement’s ability to reduce inventories
  • We trim our 2017 and 2018 average Brent forecasts to $55.46/bbl (-$0.55/bbl on previous forecast) and $57.18/bbl (-$2.45/bbl), respectively
  • Saudi energy minister Khalid al-Falih fired a warning shot to his partners and the market at CERAWeek in Houston, saying the country would not tolerate “free-riders”
  • We expect oil demand to rise by 1.47 million b/d in 2017 (-0.12 million b/d on previous forecast), mainly driven by China and India
  • India will face curtailed demand growth this year as a result of demonetisation OPEC compliance improved to 84% in February, but is still reliant on three members supporting less compliant nations
  • We consider it likely OPEC’s production deal extends beyond June on similar terms
  • US production has grown mostly from offshore rather than LTO as yet, filling crude and gasoline inventories as refinery runs fall

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